Morgan Stanley Is Watching Etsy's Traction, Raises Price Target

Etsy Inc. ETSY is getting craftier at boosting sales of unique, vintage and custom craft items on its website, piquing the interest of Morgan Stanley in the company’s stock.

Analysts had said last month that even after an impressive fourth-quarter earnings beat, the company seemed cautious. But after its Investor Day last week, there’s a renewed sense of appreciation for growth potential at the online marketplace company.

The Analyst

Morgan Stanley’s Brian Nowak is keeping an Equal-Weight rating on the stock, but said he’s “watching traction in new initiatives” and raised his price target from $49 to $65.

The Thesis

Etsy, which seeks to connect buyers and sellers of unique items, is already up about 41 percent year to date and presented a case for higher revenue and earnings estimates still, leaving Morgan Stanley watching opportunities the company says it has for growth.

Etsy’s top categories are home furnishings – it sells more than 1000 items of furniture a day – followed by apparel and jewelry.

Nowak said Etsy sees opportunities to gain customers with more effective audience targeting, optimization of the landing webpage, and enhanced marketing capabilities. Search enhancements have boosted growth already, and the company’s ongoing efforts to improve that are promising, he wrote in a note to investors.

The company also sees opportunities to boost the average value of orders through improvements in merchandising and inventory management, Nowak said.

"We are closely monitoring Etsy's progress on its growth initiatives as the company (in our view) is executing at a high level,” Nowak wrote.

Price Action

Etsy's stock was up 4.7 percent Monday afternoon at $70.98 per share.

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Photo courtesy of Etsy.